Page 6 - DMEA Week 02 2020

DMEA COMMENTARY DMEA
 Jordan’s options
Jordan, which is struggling under a moribund economy, turned to Israeli gas in an attempt to wean itself off dependence on supply from Egypt.
In 2011, repeated attacks on the pipeline between Egypt and Jordan disrupted the coun- try’s supply.
In the face of faltering gas supplies, Jordan
was forced to turn to expensive fuel oil for its power needs, resulting in a 30% hike in its budget deficit.
Overall the pipeline attacks cost Jordan $5bn, with $3bn of that being charged to consumers as an extra expense on the public’s energy bills.
The Leviathan partners have already signed major export deals with Egypt, which will begin importing Israeli gas later this month. ™
Deal signed to allow EastMed pipeline to proceed
EAST MED
WHAT:
Through a previously signed agreement Israeli gas has begun to flow to Jordan’s NEPCO.
WHY:
Jordan has a large deficit in gas supply, and Israeli gas helps to fill that gap.
WHAT NEXT:
The deal is not popular in Jordan, and its government will have to deal with a raft of legal actions.
AFTER a year of conflicting announcements, Greece, Cyprus and Israel signed the inter-gov- ernmental agreement for the EastMed gas pipe- line on January 2 in Athens.
The agreement was signed after a meeting in Athens of Israel’s caretaker prime minister Ben- jamin Netanyahu, Greek Prime Minister Kyri- akos Mitsotakis and Cypriot President Nicos Anastasiades. All three countries have greeted the agreement with enthusiasm, but what does the deal actually entail, and what is the future of this pipeline?
Pushing this through now is primarily a political response by Greece, Cyprus and Israel to Turkey’s challenge, posed through its recent agreement with Libya to demarcate their mar- itime boundaries – which is incompatible with the internationally recognised law of the seas, UNCLOS.
The EastMed pipeline agreement constitutes a milestone in terms of Eastern Mediterranean politics, and it certainly strengthens relations between the three countries at a critical time for the Eastern Mediterranean, promoting closer co-operation. It also has the support of the EU and the US. Italy, where the pipeline will end up, did not participate in the signing cere- mony owing to active resistance from commu- nities near potential pipeline landing sites and increased resistance from environmental activ- ists – as was the case with the TAP pipeline. But Italy has confirmed its support for the project.
The agreement sets the legal framework for the possible construction and operation of the EastMed gas pipeline, if implemented, but by itself it will not lead to its construction. This requires securing buyers of its gas in Europe and companies to invest in the pipeline.
The signature of a letter of intent (LoI) between Greece’s public gas supply company DEPA and Energean, earlier on 2 January, to supply 2bn cubic metres (bcm) per year of gas to the pipeline from Energean’s gas fields in Israel, is a good start in terms of securing the required
gas supplies. It is very likely that others such as Noble Energy, the operator of the Leviathan gas- field, and possibly ExxonMobil, the operator of the Glafkos gas field in Cyprus, may follow suit at some stage. Such deals could secure enough gas for the first stage of the project, which requires 10 bcm per year.
If built, by 2025 the pipeline would take gas from Israel and Cyprus to Crete and from there to the Peloponnese and then to western Greece. An additional leg would take the gas to Italy.
EastMed is not due to be completed until the mid-2020s. Its developer, IGI Poseidon, a joint venture consisting of DEPA and Italian gas utility Edison, said in December that it would make a final investment decision (FID) within two years.
A study by DEPA and Edison, with part European Commission (EC) funding, estimates the cost of the 1,900-km pipeline to Greece could be between $6-$7bn, giving a unit cost of $3.50/ mmbtu (per about one thousand cubic feet). Including the cost of taking the pipeline to Italy, experts consider this to be optimistic, with the total cost likely to be $8-$10bn.
The proposed pipeline will be technically challenging but feasible. It will connect recently discovered gas fields beneath the sea floor of the south-eastern Mediterranean to Greece, and from Greece via an additional leg to Italy and then on to Europe.
The line would supply around 4%, or an initial 10 bcm, of the EU’s annual natural gas imports. EU countries currently meet around 40% of their natural gas import needs with gas from Russia.
Diplomacy
The project would ease the EU’s energy dependence on Russia. But it has also angered Turkey, which is a key transit nation for supplies
of Russian natural gas on their way to Europe. thereby giving Turkey a source of leverage over
the latter. 
P6
w w w. N E W S B A S E . c o m Week 02 16•January•2020